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growth valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › growth valuation

  • This topic has 3 replies, 2 voices, and was last updated 11 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • February 24, 2022 at 9:02 am #649240
    nmenon3
    Member
    • Topics: 7
    • Replies: 43
    • ☆☆

    a firm maintains a 30% pay out ratio. future projects are expected to generate an annual post tax return on investment of 15% an dpre tax return of 20%. what is the firms expected annual rate of growth?

    February 24, 2022 at 11:31 am #649269
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • ☆☆☆☆☆

    There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the questions, so ask about whatever you do not understand in the answer and I will explain.

    This is simply asking you to use the Gordons growth approximation formula that is given in the exam, and I explain how to use the formula in my free lectures.

    February 28, 2022 at 7:10 am #649492
    nmenon3
    Member
    • Topics: 7
    • Replies: 43
    • ☆☆

    yes I understand sir, the doubt is whether we have to use pre tax return or post tax return on investment?
    sorry for the incomplete question

    February 28, 2022 at 8:12 am #649496
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • ☆☆☆☆☆

    Post-tax (because it is only the post-tax amount that is available to pay dividends and available for re-investment).

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